Higher Pay Equals Better Results at Walmart

Just two years ago, the National Bureau of Economic Research looked at Walmart salaries and found that while store managers were doing OK financially, lower level employees like cashiers were paid comparatively little. Since then, the company has made some significant changes to their compensation rates and to their employee retention practices and policies, and these efforts are paying off not just for individuals, but for the company at large.

The retailer is one of the largest employers in the country, employing 1.2 million workers nationwide, so any changes they make — to compensation, to policy, to the way workers progress through the organization — has the potential to affect employees at other American companies. Let’s take a look at how ditching “efficiency wages” improved the Walmart experience for both workers and customers.

The Problem:

By the end of 2014, only 16 percent of stores were meeting the customer service goals the corporation had established. Sales had fallen for five straight quarters, causing revenue to decline for the first time since the company went public 45 years prior. Low pay was impacting service, sales, and the company’s image. It was clear that these issues were very much connected and that something needed to be done.

Do You Know What You're Worth?

“Walmart’s reputation as a low-paying employer is becoming a growing problem for the company’s bottom line,” Lake Research said in press release in 2014, as reported by Al Jazeera America. “The good news for Walmart is that over a quarter of consumers confirm that if Walmart’s treatment of workers improved, their likelihood of shopping at the retailer would increase.”

The Fix:

In an effort to begin to turn things around, Walmart announced some significant changes at the beginning of 2015. Not only would they pay their workers more, they would also work toward improving other aspects of the employee experience by providing better training programs, more opportunities for advancement, and more predictable scheduling.

“We realized quickly that wages are only one part of it, that what also matters are the schedules we give people, the hours that they work, the training we give them, the opportunities you provide them,” Judith McKenna, Walmart’s chief operating officer, said in an interview quoted by The New York Times. “What you’ve got to do is not just fix one part, but get all of these things moving together.”

Although the corporation continues to be criticized for not doing more faster, the average pay for workers has risen by 16 percent since 2014. The company plans to open 200 training centers to assist new department managers. Also, opportunities to advance within the organization appear to be better than they were in the past. But, is that because they had so far to go?

“Out of the gate, they’ve seen some improvement, but I think that’s because they were doing Retail 101 so poorly,” Brian Yarbrough, a retail analyst at Edward Jones & Company told The New York Times. “The better question is what happens next year and the following year. The low-hanging fruit has been harvested.”

Although Walmart has a way to go in order to become an employer of choice, the changes they have implemented appear to be moving the needle.

By early 2016, the percentage of Walmart stores that were hitting the targeted customer-service ratings was up from 16 percent to 75 percent.

Sales numbers are improving.

The average pay for full-time non-managerial employee is now $13.69 an hour — up 16 percent since 2014.

Starting pay for an assistant store manager is now $48,500.

There are reportedly more opportunities for advancement within the organization.

Walmart is investing more resources into training programs for new hires and new managers.

The idea that treating workers better leads to improved performance, and an increased bottom line for the company, is not new. In fact, it’s at least as old as the labor movement itself.

When employees feel there are opportunities for advancement, they are incentivized to work harder and produce higher quality results. When they are better paid, and shown respect by being offered more predictable schedules, they are more likely to feel satisfied with their job and stick around longer. Higher retention leads to more expertise and better customer service.

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